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Global Commodity Technical Analysis Report

Commodities Trading Cautiously Ahead of FOMC Meeting, One Commodity in a Sell Zone – Crude Oil

Dec 15, 2021

Global Commodity Market Wrap-Up

Last week, almost all commodities recovered from the lower levels despite the rising dollar index which is hovering around its one and a half years high levels. Meanwhile, the gold and silver prices are consolidating with a weak tone impacted by FED that gave the signal to increase interest rates faster than expected to counter the rising inflation rate. Notably, Gold prices settled flat at a 0.05% weekly gain while silver prices settled at a weekly loss of -1.27%. Base metals continued to trade in a range with a positive stance. Lead and Zinc prices witnessed a weekly gain of 3.63% and 5.39% respectively

On the Energy front, Crude oil prices recovered from the recent fall-off and settled with a sharp upside recovery of 8.14%. The natural gas prices are trading in a range after the prices came down to a 4-month low due to mild weather forecasts in the US impacting the demand for the commodity. Natural gas settled at a weekly loss of -4.56%. Agricultural commodity prices are continuously showing range bound movement as Corn and Sugar prices settled at 1.03% and 5.12% weekly gain respectively.

In the recent week, all major commodity segments are showing southward movement due to rising cases of new COVID-19 variant Omicron. Meanwhile traders are having a closer look on the upcoming FOMC statement that might increase the volatility in the commodity segments.

The upcoming macro events that may impact the market sentiments include an update on Retail Sales, FOMC Statement, Unemployment Claims, Crude Oil Inventories, and Current Account.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on our technical analysis, noted below is our recommendation with the generic insights, entry price, target prices, and stop-loss for Crude Oil February Futures (NYMEX: CLG2) for the next 1-2 weeks’ duration:      

Crude Oil February Futures (NYMEX: CLG2)

Price Action and Technical Indicator Analysis:

On the daily chart, NYMEX Crude Oil February Futures' prices are sustaining below a downward sloping trend line and facing the resistance of the same trend line, indicating the possibility of a downside direction.  The momentum oscillator RSI (14-period) is trading below mid-point at ~42.69 level. The prices are also trading below the trend-following indicators 21-period SMA and 50-period SMA, further supporting a negative bias. Now the next crucial support level appears to be at USD 66.60, and prices may test this level in the coming sessions (1-2 weeks).           

As per the above-mentioned price action and technical indicators analysis, we can conclude that Crude Oil February Futures (NYMEX: CLG2) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. The summary of our ‘Sell’ recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, WASDE report, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the commodities prices:

Futures Contract Specifications: 

Disclaimers 

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact the commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Note 1: Investors can consider exiting from the stock if the Target Price mentioned as per the Technical Analysis has been achieved and subject to the factors discussed above.

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the commodity. Commodity with high volumes is more liquid compared to the lesser ones. Liquidity in commodity helps in easier and faster execution of the order. 

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~80% Stop Loss of the Target 1 from the entry point.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is December 15, 2021 (Chicago, IL, USA 03.28AM (GMT -6). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any commodity evaluation. The above are illustrative analytical factors used for evaluating the commodity; other parameters can be looked at along with additional risks per se.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.